According to the latest
market research from Canalys, Xiaomi, the Chinese smartphone
maker that sells cheap smartphones and tablets that
look eerily like Apple products, is now the number one
smartphone vendor in its home country. Xiaomi accounted for 14%
of China’s smartphone sales in the second quarter, while Samsung
accounted for just 12%, according to Canalys.

China is the biggest smartphone market in the world, so losing
control of the market is a big deal for Samsung.

Companies like Xiaomi are finally figuring out how to release
phones and tablets with impressive specs and big, beautiful
displays that cost a fraction of Samsung’s
devices. Samsung’s Galaxy S5 costs at least $600. In
contrast, Xiaomi’s newest Mi4 flagship costs just
$320.

Samsung, as always, has plenty of devices waiting in the wings,
including a new Galaxy Alpha handset that looks like the iPhone
5S and the Galaxy Note 4 "phablet," which will
likely be unveiled just ahead of this year’s IFA conference in
Berlin in early September. But as this chart shows, Samsung’s profits
are taking a bit hit as it seeks to compete with numerous,
cheaper rivals, and the company acknowledged as much during its
earnings report.

Statista

Samsung's sales are still going strong in the U.S.,
as noted by comScore. Apple has about 42% of the market share
there and Samsung has about 28%. No one else is even
close. But Samsung, as well as Apple, may become more vulnerable to these Chinese
smartphone makers if and when they begin to sell their low-priced
handsets in the U.S. After all, when the technologies are equal,
price is usually the biggest deciding factor for
consumers.

Until those cheaper handsets
start arriving in the western hemisphere, however, Samsung will
need to fight tooth-and-nail to find new product categories
that'll make up for some of its dwindling mobile profits.

According to the
company,Samsung plans to “hire like crazy” in Silicon
Valleyto find “the next
big thing.” But unless the company decides to be a premium
electronics company like Apple, a strong dose of R&D may be
Samsung’s best bet to fend off this new wave of
cheap-but-powerful devices coming out of China.